Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 1 of 24 PageID# 44

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1 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 1 of 24 PageID# 44 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Alexandria Division ) ) ) ) Plaintiffs, ) ) v. ) Civil Action No. 1:08-CV-254 (GBL/TCB) ) NEMET CHEVROLET LTD. and THOMAS NEMET d/b/a NEMET MOTORS, CONSUMERAFFAIRS.COM, INC., ) ) ) Defendant. ) ) PLAINTIFFS OPPOSITION TO DEFENDANT S MOTION TO DISMISS OR STRIKE COMPLAINT Plaintiffs Nemet Chevrolet Ltd. and Thomas Nemet d/b/a Nemet Motors ( Nemet ) hereby oppose the motion to dismiss or strike of Defendant Consumeraffairs.com on the grounds that: Defendant s motion is untimely and should not be considered absent proof of excusable neglect; Defendant is an information content provider not subject to protection under the Communications Decency Act ( CDA ); Defendant s motion to strike punitive damages is groundless and contrary to well-recognized Virginia Commonwealth procedures; and, Plaintiffs commercial interests have been injured by Defendant s violations of the Lanham Act and therefore have standing to sue. BACKGROUND Plaintiff, Nemet, a group of franchised automobile dealers with over ninety years of experience selling cars in the New York area, have an excellent reputation for fair dealing and truthfulness. Compl. 10. Defendant Consumeraffairs.com operates a commercial website, that misleadingly portrays itself as a consumer affairs website, but in reality solicits consumer

2 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 2 of 24 PageID# 45 complaints, funnels them to class action lawyers, and generates revenue from advertising. Indeed, Defendant s founder has admitted that advertising is the website s sole source of income. Compl Defendant has admitted that every complaint submitted to the website is reviewed by class action attorneys, who have filed hundreds of cases based on that review. Compl. 15. One of Defendant s contributing editors is a practicing plaintiffs attorney in Fairfax, Virginia. Compl. 16. Defendant s website misleads consumers, diverting them from legitimate consumer protection organizations and agencies, and operates in commerce by deriving revenue from misrepresenting itself as a consumer website. None of the alleged complaints against Plaintiffs that appears on Defendant s website has been reported to the New York City Department of Consumer Affairs ( NYCDCA ), the state agency actually charged with protecting consumers where Plaintiffs business operates. Compl Defendant, which does not contest personal jurisdiction, maintains an office in Virginia. Subject matter jurisdiction is based on federal question jurisdiction under the Lanham Act and 28 U.S.C and 1338(a) and supplemental jurisdiction under 28 U.S.C. 1367, and the facts establish diversity jurisdiction under 28 U.S.C as well as based on complete diversity between Plaintiffs and Defendant and the amount in controversy. Defendant has defamed Nemet and tortiously interfered with Nemet s business by publishing numerous false complaints. Compl , In this regard, Defendant is doing far more to solicit, shape, and steer the content of complaints than merely serving as an online forum. As a website that promotes itself as a portal for potential consumer class action lawsuits, Defendant empowers consumers by providing a forum for their complaints and a means for them to be contacted by lawyers if their complaints have legal merit. Declaration of Thomas Nemet ( Nemet Decl. ) 2

3 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 3 of 24 PageID# 46 8, Attach. A. Defendant states that they work with attorneys with consumer law expertise who may contact people who post complaints to discuss potential legal remedies. Id. Defendant instructs people who use the website how to refine and shape the content of their complaints, in keeping with the website s commercial goal of attracting advertising and funneling complaints to class action lawyers. Defendant publishes original content, authored by its editorial staff, that explains how class action lawsuits work, and how potential claimants can find class action lawyers through consumeraffairs.com. Nemet Decl. 9, Attach. B. An article on the website authored by Defendant s contributing editor, Virginia attorney Joan Lisante, explains that to qualify as a class action, a lawsuit must affect a broad class of individuals, all similarly harmed.... Nemet Decl. 10, Attach. C. Meanwhile, Defendant s website contains original content authored by Defendant that falsely casts Plaintiffs in a negative light to help attract more complaints. Defendant published comments about Plaintiffs, clearly written by Defendant s own editorial staff, that describe one of their own employee s efforts to summarize everything that can go wrong when buying a car. Nemet Decl. 14, Attach. E. Defendant s own content then states [i]f we had paid more attention to the complaints about Nemet Automotive Group of the airport-rich borough of Queens, she might not have had to bother. The Nemet complaints pretty well cover the territory -- everything from prices engraved in sand to advertising that overlooks certain crucial elements. Id. Defendant also states, in other original content published on the website, that despite Plaintiffs long history in the automobile business, some of Nemet s customers aren t so impressed, as the complaints in this section indicate. A selection of assorted recent complaints appears below, while categorized beefs are listed to the right. Nemet Decl. 13, Attach. D. Consistent with Defendant s original content that attacks Nemet s alleged pricing and advertising practices, Defendant s website page for Nemet Motors categorizes complaints by 3

4 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 4 of 24 PageID# 47 specific categories designed to shape complaints so they are more appealing for class action lawyers who work with the website to review complaints. Nemet Decl , Attach. D. By establishing specific categories on its website such as changing prices, extended warranties, and advertising, reinforcing those categories with original editorial content authored by Defendant, and advising website users that class actions require similar harm among many parties, Defendant participates in creating the content of complaint by instructing users of the website how to channel their complaints into broad classes, consistent with the original content that Defendant authored and placed on its website to promote class action lawsuits. Nemet Decl. 13, Attach. D. Additionally, at least two recent complaints about Plaintiffs that are posted on Defendant s website cannot be traced to any specific customer based on the name, address, and make and model year of car provided. Nemet Decl. 16. Plaintiffs believe these complaints may have been authored by the Defendant in yet another effort to solicit certain types of complaints and promote the website s commercial purposes of attracting advertising (of which advertisements by law firms are a significant part) and facilitating class action lawsuits. Id. Plaintiffs also allege that they have been damaged by Defendant s false advertising under the Lanham Act, 15 U.S.C. 1125(a)(1)(A), for using the name consumer affairs in commerce in a manner that is likely to cause confusion or deception about the origin, sponsorship, or approval of Defendant s services or commercial activities. Compl Finally, Plaintiffs have been damaged by Defendant s misuse of the name consumer affairs in a manner that is likely to influence consumer purchasing decisions by deceiving consumers, including Plaintiffs customers. Compl This matter appears before the Court on a motion to dismiss under Federal Rule of Civil Procedure Rule 12(b)(6). On a motion to dismiss, the allegations in Plaintiffs Complaint are 4

5 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 5 of 24 PageID# 48 taken as true. Conley v. Gibson, 355 U.S. 41, (1957). Otherwise, Jetform Corp. v. Unisys Corp., 11 F.Supp.2d 788, 789 (E.D. Va. 1998), succinctly states the applicable legal standards: Rule 12(b)(6) motions test the legal sufficiency of a complaint. Randall v. United States, 30 F.3d 518, 522 (4th Cir. 1994). Accordingly, such motions should be granted only in very limited circumstances. Rogers v. Jefferson-Pilot Life Ins. Co., 883 F.2d 324, 325 (4th Cir. 1989). A motion to dismiss under Rule 12(b)(6) should be denied unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. De Sole v. United States, 947 F.2d 1169, 1177 (4th Cir. 1991) (quoting Coakley & Williams, Inc. v. Shatterproof Glass Corp., 706 F.2d 456, 457 (4th Cir.1983)). Generally, a motion to dismiss under Rule 12(b)(6) must be assessed in light of Rule 8 s liberal pleading standards. Rule 8 requires a short and plain statement of the claim showing that the pleader is entitled to relief. The complaint need only state sufficient facts to enable the defendant to draft a responsive pleading. 5A Wright & Miller, Fed. Practice and Procedure, In this case, Plaintiffs have submitted a declaration by Thomas Nemet that addresses certain facts about Defendant s website. The facts in this declaration need not be pleaded in a complaint but should nonetheless be taken as true on a Rule 12(b)(6) motion. ARGUMENT I. THE COURT SHOULD DENY DEFENDANT S MOTION AS UNTIMELY Defendant filed their motion outside the time authorized by the Rules and has not filed the requisite motion averring excusable neglect. The Federal Rules of Civil Procedure clearly state that motions under Rule 12 must be filed within 20 days after being served with the summons and complaint. FED. R. CIV. P. 12(a)(1)(A)(i). Generally, the time limits in the Federal Rules of Civil Procedure may be enlarged if a request is made before the expiration of the prescribed period, or on motion made after the time has expired if the party failed to act because of excusable neglect. FED. R. CIV. P. 6(b)(1)(B). Moreover, the Local Rules provide that after the complaint is filed, all pleadings, motions, briefs, and filings of any kind must be timely filed with the Clerk s Office of the division in which the case is pending. Local Civil 5

6 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 6 of 24 PageID# 49 Rule 7(H). Further, [a]ny requests for an extension of time relating to motions must be in writing and, in general, will be looked upon with disfavor. Local Civil Rule 7(I). Here Defendant filed after the deadline expired and without any request for enlargement of time, much less a representation of excusable neglect. Defendant was served with the Complaint by hand on March 19, 2008, at its office in Fairfax. Declaration of Andrew Friedman ( Friedman Decl. ) 5, Attach H. According to the Rules, Defendant s answer or responsive motion should have been filed no later than April 8, Defendant missed the deadline and filed the instant motion on April 14, 2008 without seeking an enlargement. Accordingly, the Court should decline to consider Defendant s motion and order Defendant to answer the Complaint. Denial would not unfairly prejudice the Defendant, which could raise the same issues in the future. II. INFORMATION CONTENT LIKE CONSUMERAFFAIRS.COM ARE NOT PROTECTED BY THE COMMUNICATIONS DECENCY ACT A. Defendant s Motion Should Be Denied As Premature Defendant s motion is premature because the Communications Decency Act, 47 U.S.C. 230, establishes an affirmative defense that must be addressed on the merits after discovery, not on a preliminary dispositive motion. Though courts may refer to the CDA as creating a sort of immunity, the CDA does not block jurisdiction. Rather, the CDA has created a broad defense to liability. Whether or not that defense applies in any particular case is a question that goes to the merits of that case. Energy Automation Sys., Inc. v. Xcentric Ventures, LLC, 2007 U.S. Dist. LEXIS 38452, *40-41 (M.D. Tenn. May 25, 2007). In Energy Automation, the court held that the issue of whether the CDA applied to the defendant s conduct concerning the plaintiff requires a factual determination that is not appropriately made at this early stage of the litigation. Ruling on that issue requires inquiry into a factual record that will not exist until the parties have been afforded ample time to complete discovery. Id. Like the plaintiff in Energy 6

7 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 7 of 24 PageID# 50 Automation, Nemet has submitted a declaration that disputes Defendant s assertion of CDA immunity and Defendant s contention that it is an interactive computer service. See generally Nemet Decl For this reason alone, Defendant s motion to dismiss Counts I and II under the CDA should be denied as premature, and Defendant should be ordered to answer the Complaint. B. Defendant Does Not Qualify for CDA Immunity Defendant s motion to dismiss Counts I and II should be denied because it is an information content provider, therefore not qualified for the immunity under the CDA. The CDA only protects providers or users of an interactive computer service from claims that would hold service providers liable for information originating with a third-party user of the service. Zeran v. Am. Online, Inc., 129 F.3d 327, 330 (4th Cir. 1997). The statute defines an interactive computer service as any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such systems operated or services offered by libraries or educational institutions. 47 U.S.C. 230(f)(2). As set forth below, Defendant s website is not an interactive computer service. Rather, Defendant s website, consumeraffairs.com, is an information content provider that is not protected by the CDA. The statute defines an information content provider as any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet or any other interactive computer service. 47 U.S.C. 230(f)(3) (emphasis added). In considering whether a website is an information content provider, courts evaluate whether the website participated, in whole or in part, in the creation or the development of the information on the site. Fair Hous. Council of San Fernando Valley v. Roommates.com, LLC, 489 F.3d 921, 929 (9th Cir. 2007) (interactive roommate match service 7

8 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 8 of 24 PageID# 51 responsible, by categorizing, channeling and limiting the distribution of users profiles, for creating or developing information on website); Hy Cite Corp. v. badbusinessbureau.com, L.L.C., 418 F.Supp.2d 1142, (D.Ariz. 2005) (denying CDA immunity for a purported consumer reporting website); MCW, Inc. v. Badbusinessbureau.com, L.L.C., 2004 U.S. Dist. LEXIS 6678, *25-26 (N.D. Tex. Apr. 19, 2004) (same); Energy Automation, 2007 U.S. Dist. LEXIS (same). Defendant is engaged in precisely the type of content development and channeling that eliminates immunity under the CDA, and is engaged in conduct similar to the badbusinessbureau.com website that has repeatedly been denied the protections of the CDA. The series of opinions rejecting CDA immunity, including a number of lawsuits against the purported consumer website badbusinessbureau.com, are instructive because they identify specific types of conduct that render a website an information content provider. Defendant curiously has failed to cite or distinguish any of these highly relevant opinions. First, courts have noted that encouraging and instructing consumers on how to draft complaints and gather information goes beyond the traditional publisher role protected by the CDA, and constitutes creating and developing the content of the complaints. MCW, 2004 U.S. Dist. LEXIS 6678 at *34 ( the defendants cannot disclaim responsibility for disparaging material that they actively solicit ). Applying similar logic, a court held that a website that solicited purchasers of telephone records and purchased those records for resale participated in the creation or development of the information, despite the fact that the phone records themselves were created by third-parties, and was therefore denied immunity under the CDA for alleged unfair trade practices. FTC v. Accusearch, Inc., 2007 U.S. Dist. LEXIS 74905, *15-16 (D.Wyo. Sept. 28, 2007). Defendant undeniably instructs its website users how to craft complaints so they will be more appealing to consumer class action lawyers. These instructions appear in original content 8

9 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 9 of 24 PageID# 52 authored by Defendant. An article authored by Virginia lawyer and consumeraffairs.com contributing editor Joan Lisante advises that to qualify as a class action, a lawsuit must affect a broad class of individuals, all similarly harmed.... Nemet Decl. 10, Attach. C. To advance Defendant s goal of attracting complaints worthy of attention by consumer class action lawyers for a potential lawsuit against Plaintiffs, various portions of the website that refer to the Plaintiffs identify and reinforce specific categories of alleged misconduct by Plaintiffs specifically, disputes over pricing, advertising, and extended warranties. Nemet Decl. 13, Attach. D. Defendant admits that it forwards complaints to class action lawyers, for the purpose of having the complaints reviewed for possible lawsuits a very similar type of conduct cited in Accusearch as the basis for finding the website was not protected by the CDA. By providing guidance and channeling complaints against Plaintiffs into specific categories designed to attract class action lawyers attention, Defendant is helping shape and develop the content of the complaints. Second, courts have focused on the fact that the consumer-oriented website created and posted disparaging messages about a specific company. MCW, 2004 U.S. Dist. LEXIS 6678 at *32. Defendant cannot dispute that it creates original and highly disparaging content about the Plaintiffs. One comment authored by Defendant concerns an employee s quest to summarize everything that can go wrong when buying a car. Nemet Decl. 14, Attach. E. The website proceeds to falsely disparage Plaintiffs: [i]f we had paid more attention to the complaints about Nemet Automotive Group of the airport-rich borough of Queens, she might not have had to bother. The Nemet complaints pretty well cover the territory -- everything from prices engraved in sand to advertising that overlooks certain crucial elements. Id. In the section of the website specifically dedicated to Plaintiffs, a comment authored by Defendant belittles Plaintiffs long and successful history in the automobile business, stating some of Nemet s customers aren t so 9

10 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 10 of 24 PageID# 53 impressed, as the complaints in this section indicate. A selection of assorted recent complaints appears below, while categorized beefs are listed to the right. Nemet Decl. 13, Attach. D. The latter insulting remarks serve as an introduction to the defamatory complaints against Plaintiffs, which appear immediately below the Defendant s commentary exactly the type of heading or introduction that was critically important to the ruling against badbusinessbureau.com in MCW. Third, soliciting individuals to submit reports with the promise that individuals may ultimately be compensated for their reports could support a finding that the website was responsible for creating or developing information provided by people who respond to the solicitation. Hy Cite, 418 F.Supp.2d at 1149; see also 47 U.S.C. 230(f)(3). Defendant s website trumpets the fact that every complaint submitted to the website is reviewed by class action attorneys, who have filed hundreds of cases as a result of that review. Compl. 15. This key factor distinguishes third-party submissions to comparatively passive websites like AOL, MySpace, Ebay, and Yahoo, which generally implicate routine publisher functions like the decision of whether to publish, edit, or withhold third-party content. Here, Defendant is participating in creating content by soliciting specific kinds of complaints with the promise of potential compensation, in the form of a class action lawsuit recovery. Fourth, websites that engage in categorizing, channeling and limiting information that appears on the website are responsible, at least in part, for creating or developing the information. Fair Hous. Council, 489 F.3d at 929. Defendant accomplishes this by listing categorized beefs about Nemet on the website, such as pricing and advertising complaints, and by reinforcing those categories in highly negative editorial comments about Plaintiffs. Nemet Decl. 13, Attach. D. Viewing these actions in the context of a website that admits it packages complaints for review by class action lawyers, the fact that Defendant ConsumerAffairs.com has 10

11 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 11 of 24 PageID# 54 created and reinforced specific categories of complaints about Nemet Plaintiffs plays a crucially important role in shaping the content of the complaints. Indeed, Defendant Consumeraffairs.com derives the most benefit from the class action lawyers who review the complaints, and advertise on Defendant s website, if the complaints fit into categories that satisfy the commonality requirements of Federal Rule of Civil Procedure 23. In conclusion, courts have consistently rejected CDA immunity for websites that participate in creating content by shaping or developing third-party information posted on the site. The allegations in the Complaint and in the Declaration of Thomas Nemet, both of which extensively describe content posted on Defendant s own website, make a compelling case for finding that Defendant Consumeraffairs.com is an information content provider that does not qualify for the immunity provisions of the CDA. C. Defendant Cites Cases Which Are Inappropriate. The cases cited by the Defendant are all distinguishable. Defendant s original content and solicitation of complaints for the purpose of fueling class action lawsuits simply goes well beyond the traditional editorial functions performed by websites like AOL, MySpace, and Ebay. See, e.g., Zeran, 129 F.3d at (traditional publisher role involves decision whether to publish, edit, or withdraw a posting); Doe v. MySpace, Inc., 474 F.Supp.2d 843, 847 (W.D. Tex. 2007) (traditional editorial function means deciding whether to publish, withdraw, postpone, or alter content) (citations omitted). The case of Whitney Information Network Inc. v. Xcentric Ventures, LLC, was decided on summary judgment, after the facts surrounding the plaintiff s particular allegations in that case were fully vetted in discovery WL , *7 (M.D. Fla. Feb. 15, 2008). But see Accusearch, 2007 U.S. Dist. LEXIS (rejecting CDA immunity on a motion for summary judgment). More importantly, plaintiff Whitney did not dispute that badbusinessbureau.com was an interactive computer service, while the Nemet 11

12 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 12 of 24 PageID# 55 Plaintiffs hotly dispute this contention and believe the Defendant is a non-immune information content provider. Id. at *8. The only court that has applied CDA immunity to a consumer complaint website was faced with completely different claims and arguments than Plaintiffs contentions this case, or the claims and contentions addressed in other opinions that have denied CDA immunity. In Global Royalties, Ltd. v. Xcentric Ventures, LLC, plaintiff Global argued only that the defendant refused to remove specific content and alleged only minor participation by the defendant in composing the alleged defamatory messages WL , *3 (D.Ariz. Feb. 28, 2008). As discussed, Defendant: authors and publishes original articles that guide website users on how to effectively draft complaints that will interest class action lawyers; authors and publishes original content in the form of highly negative opinions about the Plaintiffs, then solicits complaints; repeatedly suggests specific categories of alleged misconduct for website users to focus on; then promises that all complaints will be reviewed by class action lawyers, and that users of the website may recover money as a result. Furthermore, Plaintiff Nemet s Declaration states that customers cannot be identified for at least two of the complaints against Plaintiffs, and that these complaints were likely authored by Defendant s editors to help solicit more complaints. Nemet Decl. 16. This latter point clearly cannot be resolved without fact discovery. III. DEFENDANT S ARGUMENT AS TO PUNITIVE DAMAGES IS MISPLACED The Court should deny Defendant s motion to strike Plaintiffs punitive damages claim because Virginia law caps punitive damage awards, not the ability to claim punitive damages in excess of the cap. Of course, it is axiomatic under Virginia s law that neither a court nor a jury may award punitive damages in excess of $350,000. Va. Code Ann However, the statute clearly acknowledges a party s ability to claim punitive damages in excess of the cap, as well as a jury s power to determine that punitive damages exceeded the cap: The jury shall not 12

13 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 13 of 24 PageID# 56 be advised of the limitation prescribed by this section. However, if a jury returns a verdict for punitive damages in excess of the maximum amount specified in this section, the judge shall reduce the award and enter judgment for such damages in the maximum amount provided by this section. Id. The Supreme Court of Virginia expressly endorsed this approach in an opinion concerning Virginia s medical malpractice damages cap: A trial court applies the remedy s limitation only after the jury has fulfilled its fact-finding function. Thus, Code does not infringe upon the right to a jury trial because the section does not apply until after a jury has completed its assigned function in the judicial process. Etheridge v. Med. Ctr. Hosps., 237 Va. 87, 96 (1989) (emphasis in original). Clearly, the statutory cap limits the amount of punitive damages that can be awarded but does not affect the amount of punitive damages that can be claimed in a complaint. To the extent the two unpublished cases relied upon by the Defendant create any confusion about how the damages caps actually operate in the courts of the Commonwealth of Virginia, the text of the statute and Etheridge control on this issue of state law. See Faircloth v. Finesod, 938 F.2d 513, 517 n.9 (4th Cir. 1991) (federal courts generally bound by state court s interpretation of its own statutes); Rutherford v. Blankenship, 468 F.Supp. 1357, (W.D. Va. 1979) ( The Virginia Supreme Court s interpretation as to the import of its own law is conclusive. ); Ferguson v. Manning, 216 F.2d 188, 188 (4th Cir. 1954) ( It is too well settled to admit of argument that the federal courts are bound by the interpretation placed upon the statutes of a state by its highest court. ). Accordingly, Defendant s motion to strike the punitive damages claims should be denied. IV PLAINTIFFS ARE INJURED PARTIES WHO HAVE STANDING TO SUE UNDER THE LANHAM ACT D. Constitutional Standing Is Undisputed 13

14 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 14 of 24 PageID# 57 Defendant does not dispute that Plaintiffs are injured parties entitled to standing under the Constitution. Whether a party has standing involves both constitutional limitations on federalcourt jurisdiction and prudential limitations on its exercise. Warth v. Seldin, 422 U.S. 490, 498 (1975). To establish constitutional standing, a plaintiff must show (1) an actual or threatened injury (2) that was caused by the putatively illegal conduct of the defendant and (3) that is likely to be redressed by a favorable decision. Planned Parenthood of S.C., Inc. v. Rose, 361 F.3d 786, 789 (4th Cir. 2004) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, (1992)). Defendant concedes that Plaintiffs have adequately alleged injury that was caused by Defendant s allegedly illegal conduct, or that a favorable decision would at partially remedy the Plaintiffs injury. See Compl E. As a Party Injured in Commerce by Defendant s Misleading Use of the Name Consumer Affairs, Plaintiffs Have Prudential Standing to Sue Under the Lanham Act Plaintiffs have standing to sue under the plain language of the Lanham Act, the Fourth Circuit s approach to evaluating Lanham Act standing, and the approach used in most other circuits. Defendant s assertion that Plaintiffs must be a direct competitor to assert Lanham Act claims is contrary to Fourth Circuit precedent and the facts of this case. 1. The Language and Purpose of the Lanham Act Support Plaintiffs Standing to Sue in This Case The Lanham Act does not restrict standing to competitors. Rather, it is meant to protect persons engaged in such commerce [as Congress may regulate] against unfair competition. 15 U.S.C To this end, Section 43(a) of the Lanham Act provides: (1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which 14

15 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 15 of 24 PageID# 58 (A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act. 15 U.S.C. 1125(a)(1) (emphasis added). It is well-settled that [t]he starting point for any issue of statutory interpretation is the language of the statute itself. United States v. Bly, 510 F.3d 453, 460 (4th Cir. 2007). The plain meaning of legislation should be conclusive, except in the rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters. United States v. Ron Pair Enters., 489 U.S. 235, 242 (1989) (citations and quotations omitted). This plain language does not prevent the Plaintiffs, who are in the business of selling automobiles, from suing a website that posts false consumer complaints and deceives consumers into thinking the complaints are the accurate, fact-checked complaints posted by legitimate consumer protection agencies and organizations. Congress easily could have limited standing to competitors rather than any person, but instead chose to allow broad standing to assert Lanham Act claims. Plaintiffs claims are also consistent with the overall remedial purpose of the Lanham Act. The Act is designed to provide a remedy for all persons who are victimized by misleading and deceptive use of trade names, whether for unfair competition, false advertising, or trademark or trade dress infringement. See, e.g., Warner Bros., Inc. v. Gay Toys, Inc., 658 F.2d 76, 79 (2d Cir. 1981) ( 43(a) of the Lanham Act is remedial in nature, and should be interpreted and applied broadly so as to effectuate its remedial purpose. ); Thorn v. Reliance Van Co., 736 F.2d 929, 932 n.5, 933 (3d Cir. 1984) (acknowledging the widely-held view that as a 15

16 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 16 of 24 PageID# 59 remedial statute, [Section 43(a)] should be broadly construed, and holding, the mere fact that Thorn is not a competitor of Reliance does not, in and of itself, preclude him from bringing suit under section 43(a). ); Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1383 (5th Cir. 1996) ( Section 43(a) of the Lanham Act has been characterized as a remedial statute that should be broadly construed. ); Frisch s Rests. v. Elby s Big Boy, 670 F.2d 642, 651 (6th Cir. 1982) (quoting Warner Bros., 658 F.2d at 79); F.E.L. Publ ns, Ltd. v. Catholic Bishop of Chicago, 214 U.S.P.Q. 409, 416 (7th Cir. 1982) ( Section 43(a) of the Lanham Act is a remedial statute that must be broadly construed. ); Montgomery v. Noga, 168 F.3d 1282, 1300 (11th Cir. 1999) (acknowledging the the well-established principle that section 43(a) should be broadly construed ). Based on the broad language of the statute and its broad remedial purpose, it would be unjust to reject Plaintiffs claims. 2. Under the Fourth Circuit Approach to Determining Standing Under the Lanham Act, Defendant s Motion Must be Denied Defendant s discussion of the various tests applied in different circuits and attempts to characterize Plaintiffs claims as typical Lanham Act allegations, obscure the fact that the Fourth Circuit takes a much more realistic and fact-based approach to determining standing under the Lanham Act. In the Fourth Circuit, the touchstone of the analysis of Lanham Act standing is whether the claimant is trying to protect purely commercial interests against unscrupulous commercial conduct. Made in the USA Found. v. Phillips Foods, Inc., 365 F.3d 278, 280 (4th Cir. 2004). In Made in the USA, a controlling case that Defendant elected to bury in a footnote, the Fourth Circuit denied standing to a group that represented the interests of consumers. Id. However, the Court also relied on a First Circuit case holding that a Plaintiff must have a reasonable interest in being protected from false advertising to have standing and must therefore show a link or nexus between itself and the alleged falsehood. Camel Hair & Cashmere Inst, Inc. v. Assoc. Dry Goods Corp., 799 F.2d 6, (1st Cir. 1986). 16

17 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 17 of 24 PageID# 60 In Camel Hair, the First Circuit held that the plaintiff-trade group had standing, even though neither it nor any of its members were competitors of the defendant, because the plaintiff had a strong interest in preserving cashmere s reputation as a high quality fibre. 799 F.2d at 12. Consequently, the Fourth Circuit concluded that standing was proper in Camel Hair because the plaintiff was suing to protect a commercial interest. Made in the USA, 365 F.3d at 280. The Fourth Circuit denied standing in Made in the USA because the plaintiffs were merely consumers, and no circuit recognizes consumer standing under the Lanham Act. See id. ( At least half of the circuits hold (and none of the others disagree) that the second of these Lanham Act provisions, 45, or 15 U.S.C. 1127, bars a consumer from suing under the Act. ). Here, Plaintiffs sell cars, a business where a good reputation and customer trust are absolutely essential to success. Over 90 years, Plaintiffs built a stellar reputation with customers and with the true consumer advocates, the New York City Department of Consumer Affairs. Compl. 10; Nemet Decl It is crucially important to understand that the NYCDCA website includes hundreds of complaints about car dealers throughout the New York City area, but not a single complaint about Plaintiffs. Compl. 13; Nemet Decl. 4. Thus, Plaintiffs are directly harmed when Defendant misleadingly describes itself as a consumer affairs website but irresponsibly solicits, develops, and posts defamatory content, all for the purely commercial purposes of (a) funneling those defamatory complaints to class action lawyers and (b) attracting advertising revenue. Plaintiffs Lanham Act claims are clearly intended to protect Plaintiffs purely commercial interest in legitimate, honest, and accurate consumer affairs organizations, and to remedy Plaintiffs injuries as a result of Defendant s misleading commercial use of the 1 The NYCDCA also posts complaints against automobile dealers on its website. None of those complaints are about Nemet Motors because Nemet Motors provides excellent customer service and works to resolve the few customer complaints it receives, but some New York automobile dealers have dozens or even hundreds of complaints posted on the official New York consumer affairs website for improper business practices. 17

18 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 18 of 24 PageID# 61 consumer affairs name. Defendant s refusal to address or distinguish Camel Hair endorsed by the Fourth Circuit in Made in the USA is tantamount to an admission that Plaintiffs have standing in this case. Defendant s approach to standing in this case is unduly narrow and would lead to absurd and unintended limitations on the facially broad scope of the Lanham Act. Defendant selfservingly argues that the parties most likely to be directly affected [by Defendant s confusing and misleading use of the consumer affairs name] are those governmental agencies responsible for addressing such complaints. Def. s. Br. Supp. Mot. Strike Dismiss 13. Public consumer affairs agencies have neither the time nor the resources to pursue false advertising claims. Furthermore, the Lanham Act is intended to provide a remedy for companies that are harmed in commerce, not for public agencies. 3. The Multi-Factor Test Applied in Many Circuits Supports Plaintiffs Standing to Sue in This Case. Even if this Court applies the multi-factor test and engages in the factual inquiry conducted in some circuits, Plaintiffs have standing under the Lanham Act. Contrary to Defendant s misleading arguments, only a minority of the circuits the Seventh, Ninth and Tenth -- holds that a plaintiff must be a direct competitor to sue under the Lanham Act. See Def. s Br. 11. See Phoenix of Broward, Inc. v. McDonald s Corp., 489 F.3d 1156, (11th Cir. 2007). 2 The Eighth Circuit has not adopted this approach. See Am. Ass n of Orthodontists v. Yellow Book USA, Inc., 434 F.3d 1100, 1104 (8th Cir. 2006) ( But we need not resolve what may be a circuit conflict over the appropriate test for standing... ). The First and Second Circuits apply a less categorical approach to determine standing, wherein the dispositive issue is 2 With the exception of the Seventh, Ninth and Tenth Circuits, the courts have held that the plaintiff and defendants need not always be in direct competition with each other for plaintiff to have standing to sue for injunctive relief under 43(a). 4 J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION 27:32 (4th ed. 1996, supp. 2007). 18

19 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 19 of 24 PageID# 62 not the degree of competition, but whether the plaintiff has a reasonable interest to be protected against the type of harm that the Lanham Act is intended to prevent. Phoenix of Broward, 489 F.3d at 1165 (citing Camel Hair and Ortho Pharm. Corp. v. Cosprophar, Inc., 32 F.3d 690, 694 (2d Cir. 1994)). As noted, the Fourth Circuit has previously cited with approval the First Circuit s approach to Lanham Act standing, which analysis should control here. Plaintiffs would also have standing were the Court inclined to apply the test used by the other circuits. Three circuits the Third, Fifth, and most recently the Eleventh have adopted a multi-factor test developed by the Supreme Court for antitrust cases. See Conte Bros. Auto., Inc. v. Quaker State-Slick 50, Inc., 165 F.3d 221 (3d Cir. 1998); Procter & Gamble Co. v. Amway Corp., 242 F.3d 539 (5th Cir. 2001); Phoenix of Broward, 489 F.3d at ( we join the Third and Fifth Circuits and adopt the test for prudential standing articulated in Conte Bros. ). This approach is further endorsed by two prominent commentaries. Procter & Gamble, 242 F.3d at 562 n.51 (citing MCCARTHY 27:32 n.1; RESTATEMENT (THIRD) OF UNFAIR COMPETITION 3 cmt. f (1995)). Plaintiffs emphasize that the Fourth Circuit has not adopted this approach and has instead relied on the more flexible analysis conducted in the First and Second Circuits. Under the multi-factor approach used by the Third, Fifth and Eleventh Circuits: [T]o determine whether a party has prudential standing to bring a false advertising claim under Section 43(a) of the Lanham Act, a court should consider and weigh the following factors: (1) The nature of the plaintiff s alleged injury: Is the injury of a type that Congress sought to redress in providing a private remedy for violations of the [Lanham Act]? (2) The directness or indirectness of the asserted injury. (3) The proximity or remoteness of the party to the alleged injurious conduct. 19

20 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 20 of 24 PageID# 63 (4) The speculativeness of the damages claim. (5) The risk of duplicative damages or complexity in apportioning damages. Phoenix of Broward, 489 F.3d at (quoting Conte Bros., 165 F.3d at 233). All of these factors weigh in favor of standing for Plaintiffs Lanham Act claims against Defendant in this case, under both Sections 43(a)(1)(A) and 43(a)(1)(B). 3 As to the first factor, Plaintiffs have suffered a competitive injury as a result of Defendant s misleading use of the consumer affairs name to lend legitimacy to unconfirmed, defamatory complaints about the Plaintiffs. As a result of Defendant s misleading use, Defendant profits by generating class action lawsuits and attracting advertising revenue while Plaintiffs have suffered lost business and damage to reputation, among other harms. Plaintiffs are clearly persons engaged in commerce, and the Lanham Act is intended to protect persons in commerce from the type of false advertising and unfair competition that Defendant is accused of doing in the Complaint. See 15 U.S.C This is the type of injury that the Lanham Act is intended to remedy. For all of these reasons, this factor weighs in favor of standing for Plaintiffs. As to the second factor, Plaintiffs have described how Defendant s misuse of the consumer affairs name has directly injured Plaintiffs commercial interests. Consumers are actually misled into thinking that Defendant will help remedy their complaints and do not avail themselves of legitimate consumer affairs agencies; Plaintiffs have no complaints on the 3 In Conte Brothers, the Third Circuit flatly rejected the argument that standing under Section 43(a) should depending on the type of claim alleged: false advertising or false designation of origin. Section 43(a) provides no support for drawing a distinction in standing depending on the type of 43(a) violation alleged. The operative language that provides for standing any person who believes that he or she is or is likely to be damaged does not purport to distinguish between the two types of actions available under 43(a). 165 F.3d at

21 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 21 of 24 PageID# 64 legitimate consumer affairs agency website of the NYCDCA. Compl. 13; Nemet Decl. 4. As a direct consequence of Defendant s misleading use of the consumer affairs name, consumers who are misled or confused may refuse to do business with Plaintiffs, and Plaintiffs have and will continue to lose business and suffer damage to their reputation among customers. See Compl. 36. The second factor also weighs in favor of standing for Plaintiffs. As to the third factor, the Court should ask whether there is an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest by bringing suit. Conte Bros., 165 F.3d at 234. As discussed above, Defendant would have this Court hold that the only parties who have standing to sue this Defendant under the Lanham Act are the legitimate consumer affairs agencies or organizations. Under this perverse argument, the identifiable class has no conceivable commercial reason to challenge Defendant s misleading use of the consumer affairs name. The persons with the strongest self-interest in stopping Defendant s misleading use are the consumers who are being misled (but who do not have standing under the Lanham Act) and the commercial businesses that are being harmed by Defendant s misconduct. As a commercial entity with a stellar reputation that works hard to resolve the few consumer complaints it receives, and as an entity that has no complaints posted on the honest and legitimate consumer affairs website in New York City, Plaintiffs have the strongest self-interest in ensuring that Defendant s misleading, for-profit misuse of the consumer affairs name is stopped as soon as possible. The third factor also weighs in favor of standing for Plaintiffs. As to the fourth factor, Plaintiffs damages are concrete, not speculative. Plaintiffs allege to have lost business as a result of Defendant s misleading use of the consumer affairs name, which is exacerbated by the false and defamatory content that Defendant places on its website. 21

22 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 22 of 24 PageID# 65 At this stage in the litigation, these allegations should be accepted as true. The fourth factor weighs in favor of standing for Plaintiffs. Finally, as to the fifth factor, there is no danger of duplicative damages, or complexity in apportioning damages, as to either claim. It would not be difficult for this Court to apportion damages among the four counts in this case, and the injunctive relief Plaintiffs seek against Defendant s misuse of the consumer affairs name would not be duplicative in any event. This factor also weighs in favor of standing for Plaintiffs. 22

23 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 23 of 24 PageID# 66 CONCLUSION Based on the foregoing, Plaintiffs respectfully submit that the Court should deny the Motion to Dismiss in its entirety and direct Defendant to answer the Complaint. Respectfully submitted, /s/ Benjamin G. Chew (VSB#29113) Andrew M. Friedman Counsel for Plaintiffs Nemet Chevrolet Ltd. and Thomas Nemet, d/b/a Nemet Motors PATTON BOGGS LLP 2550 M Street, N.W. Washington, DC Telephone: (202) Facsimile: (202) bchew@pattonboggs.com 23

24 Case 1:08-cv GBL-TCB Document 8 Filed 04/28/08 Page 24 of 24 PageID# 67 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on the 28 th day of April, 2008, I will electronically file the foregoing PLAINTIFFS OPPOSITION TO DEFENDANT S MOTION TO DISMISS OR STRIKE COMPLAINT with the Clerk of Court using the CM/ECF system, which will send a notification of such filing (NEF) to Defendant s counsel, as follows: Jonathan D. Frieden, Esquire (VSB No ) Sean P. Roche, Esquire (VSB No ) ODIN, FELDMAN & PITTLEMAN, P.C Lee Highway, Suite 1100 Fairfax, Virginia (703) (703) (facsimile) jonathan.frieden@ofplaw.com /s/ Benjamin G. Chew